Partisan Politics and Institutional (Re)Creation: Locating and Explaining the Origins of Modern Finance Capitalism

Abstract

Why do some countries rely more heavily on equities markets, while others depend more on commercial banking? Analyses of the origins of contemporary capitalist institutions usually look back to the late nineteenth and early twentieth century. However, this paper demonstrates that financial institutions – regarded as central to the way capitalist systems are organised – changed radically in the mid-twentieth century in many countries. This paper argues that government partisanship in formative moments of institutional (re)creation can better account for their modern manifestation than prominent alternative explanations. A new measure of partisanship that is sensitive to these institutional transformations is presented. Case studies on Germany and France offer evidence consistent with this argument.